Learning to Trade: Trading Experience

My Grandmother used to tell me that ‘you can’t put an old head on young shoulders’

I have added a bit to this adage from my own experience ‘…that no matter how hard you try to teach them or how willing the student is’.

In the past I was always trying to prove my good old Grandmother wrong. Maybe this was partly due to the fact that she inevitably used this saying when I used to screw up on something as a teenager. However, I’m now convinced that she is right (whether she meant it in the way I see it or not). You only really learn when you try, fail, pick yourself up and try again. The secret is to manage the failure (in trading parlance – risk management).

Having said that academic study is very important and should not be disregarded or underestimated. It is a must in my opinion to obtain as much of other people’s ‘old heads’ as possible. Ultimately, however you must trade. Many traders have faced failure at some point in their trading careers. It reminds me of the movie Good Will Hunting when Robin Williams is talking to Matt Damon by the pond after Matt Damon had made pretty disparaging remarks about Robin Williams’ wife… I don’t recall it word for word but in essence Robin said things like, you think you can learn everything in a book…you don’t know what love is because you read Shakespeare, you don’t know what emotions the musty smell of the Sistine chapel causes because you saw Michelangelo’s paintings in a book etc… (one of my favorite modern movie scenes!).

I for one would therefore not sit on the sidelines for too long. I would learn as much as I can from the talent of other traders, books and mentors, mentors…etc. However, you will only really start learning when you jump in with patience and risk management as your primary tools of the trade. Thing is once you start trading the books and articles that you read become real.

Beware however – don’t become obsessed with your trading and don’t lose focus on the rest of your life. Even if everything is still perfect you can still lose simply because you do not have the strength to follow your own system (been there). Trading with small amounts will help you set goals.

Most traders will face failure… it is how you handle that failure that defines winners.

CFDs allow you to trade on margin with relatively small accounts. A proper study into the additional risks you take on and the ways to alleviate those will only stand you in better stead when you get a stake that is big enough… Jessie Livermore did this too – bucket shops. The sophisticated modern day equivalent – spreadbetting and CFDs.

I also think that you’re better off starting out relatively small and sticking with the markets that are tradable with a small account. As a beginner you are likely to make mistakes , and it’s better to make those mistakes when the absolute loss is relatively small. A more dangerous option would be to get a bank loan or a bunch of credit cards and use that for your trading money. I certainly don’t advocate this approach, as it could ruin your life if things go badly… And I rarely meet someone who has started trading and became successful right away.

You must really think of trading and CFDs like a business. Make wise investments.